Capital gains- very important issue for nov-12

CA Ashish Pathak (Employed at Cipla Ltd.) (2779 Points)

18 August 2012

Hello Friends,

This is something really important issue relating to Capital Gains for both CA Final and IPCC students appearing for Nov-12 Exams.

CAPITAL GAINS: INDEXATION IN CASE OF TRANSFER BY WAY OF GIFTS:

We know that in case where any capital assets has been acquired by way of gifts or by inherittence then Period of Holding shall be calculated from the date when the previous owner(i.e the transferor) had acquired the asset. Also Cost of Acquisition for transferee is the Cost of Acquisition of the previous owner or the transferer.

And Indexation in such cases was done by reference to the year in which assesse acqired the asset by way of gifts,etc. (though some teachers/experts suggested Indexation is to be done considering the year in which previous owner had acquired the asset)

Now this controversy has been resolved after a recent judgements of Bombay High Court and the Delhi High Court in this regard.

[CIT Vs. Manjula J. Shah 16 Taxmann 42 (Bom.)] and

[Arun Shungloo Trust Vs. CIT 205 Taxmann 456 (Del.)]

In these Judicial pronouncements following have been affirmed by both the Hon'ble High Courts :

"If an Assessee acquired a Capital Asset by way of Gift and transferred such Asset, then Indexed

Cost of Acquisition would be with reference to the year in which previous owner held the asset

and not the year in which assessee became the owner. Therefore the CII should be based on the

year in which the previous owner acquired the asset and not the year in which the assessee

became the owner"

I am also attaching a solved illustration and explaination in this regard.

(Those who are refering to Vinod Gupta Sir's Modules and classes need not worry as he suggested what has been affirmed by the High Courts and those following Padhuka's book must note this.)

Further queries in this regard are wecome.

Regards

ASHISH PATHAK